Copper
The first market I’m looking at is copper. We continue to see a lot of back and forth in this market. Now, keep in mind, Wednesday is Veterans Day and Remembrance Day in the United States and Canada, respectively, so liquidity is a major issue today.
The market is trying to stabilize right here at the 200-day EMA, as it has seen a sharp retreat from the $14,000-per-ton LME threshold. The market also has to deal with a hot CPI reading out of the United States, as headline CPI rose 0.4% month over month and core CPI came in at 0.3%. It’s lifted the dollar and yields.
However, what I’m looking for is whether or not we can take out the top of the candlestick from Tuesday. If we can, for me, that is a very bullish sign, and I would be buying copper at that point. I don’t know that we can expect much in this on-again, off-again type of futures day, but early tomorrow, this is what I’ll be watching. Can we break this candlestick? Then I’m a buyer.
EUR/USD
The Euro has broken significantly to the downside during the trading session. After the sharp drop on Tuesday, we’ve seen some continuation. The hot CPI seems to be one of the biggest culprits here. With CPI being as hot as it is, we’re starting to see people capitulate with the idea that perhaps the Federal Reserve is, in fact, going to have to not only raise rates in December, but they very well have an argument for maybe raising rates again after that.
There’s even some talk about a 50-basis-point interest rate hike. I don’t know if I buy that yet, but it certainly favors the United States dollar. Like I’ve been saying for a while, I do think we try to get to the 1.10 level eventually.
The next major announcement, at least as far as the European side of this, is going to be the November 12 flash estimate of third-quarter GDP and unemployment. If that does, in fact, show a cooling picture, that probably could accelerate this to the downside. Either way, at this point, I remain short of the euro. I have no interest in buying it.
USD/CAD
The U.S. dollar has taken off against the Canadian dollar as the employment situation between the two countries continues to diverge. Keep in mind, the CPI release in the United States, of course, was hotter than anticipated, so that only adds more fuel to the fire. We see oil softening a bit, so it all ties together to punish Canada.
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See all Copper forecastsNonetheless, both of these countries are away for the day, so this is probably thin European trading. The real question is, can we break above 1.43? Because if we do, that’s a massive sign of strength. Short-term pullbacks at this point in time, I think, make sense. They also offer buying opportunities.
CAC 40
Then finally, the CAC 40 in Paris is a little noisy during the session. It’s given back a little bit of the strength that it had intraday, but the market, for me, is one that’s watching those yields in America because a higher CPI print driving yields higher can make financing a bit more stingy around the world.
Nonetheless, I do think that the market is likely to continue to see more of a buy-the-dip behavior here, as long as energy can continue to soften a bit. The durable breakout would need to see financials, aerospace, and technology leadership, as well as luxury, as per usual in Paris. If we can break today’s high, I’m willing to have a go at it. A pullback toward the 200-day EMA and a bounce- I’m willing to have a go at that as well.